Special Report – Belt and Road

‘Belt and Road Initiative’ analysts warn Europe – don’t miss the boat

You need to be involved with infrastructure project from the start to get the maximum benefit, analysts say

PUBLISHED : Wednesday, 27 September, 2017, 3:30pm
UPDATED : Wednesday, 27 September, 2017, 3:30pm

As the “Belt and Road Initiative” begins to be articulated, in terms of what China’s “second Marshall Plan” – the American initiative to rebuild Western Europe after the second world war – means for the countries involved, the focus has largely been on Asian projects.

China’s development of Gwadar Port in Pakistan, an expressway in Phnom Penh, and hydropower investments in Malaysia and Laos have all featured prominently. Yet, for the number of tangible results, the initiative remains shrouded in mystery for many – what will it all mean for European countries?

Based on the concept of recreating the Silk Road for modern times, the focus of the initiative looks to be aimed squarely at boosting Chinese-built infrastructure in Asia, and expanding markets for Chinese-made goods in the region and globally. But what about European involvement? The new Silk Road does not appear to be connecting Europe as much as previously vaunted.

“Many European governments and companies don’t understand what [the] ‘Belt and Road [Initiative]’ is, and risk missing the boat,” says Daniël de Blocq van Scheltinga, managing partner at Polarwide and treasurer of the European Chamber of Commerce in Hong Kong. “Most are saying ‘ok, it’s an infrastructure play and we’ll see what happens when it gets here’. That’s not the way to deal with the Chinese government. You need to be involved with it from the beginning.”

The establishment of a London-Yiwu railway line this year garnered much attention, joining existing routes. The train carried whisky, soft drinks, vitamins, baby food and pharmaceuticalsabout 12,000km through France, Belgium, Germany, Poland, Belarus, Russia and Kazakhstan.

Strategic plans to develop infrastructure predate the “Belt and Road Initiative”, and there will most likely be an uptick in extending economic ties. With European economic recovery a work in progress, Trump’s isolationist approach has necessitated a gravitation, however temporary or expedient, towards China. China is boosting its exports, to help its economic growth.

“The opportunities are there for countries to take it seriously,” says van Scheltinga, who cites Eastern European countries among the non-traditional Silk Road destinations seeking a piece of the action.

“Trade is not a threat, and China sees Europe as its biggest market, using the biggest infrastructure put in place for trade, that can only benefit everyone. If China sends goods that are not wanted in Europe they won’t be bought.”

It is a view shared by Frans-Paul van der Putten, senior research fellow, at the Clingendael Institute. “Trade between China and Europe is still directed primarily at the West, where the largest economies and the main transport hubs are. The ‘Belt and Road Initiative’ may change this,” he says.

“As a result of this initiative, logistical hubs and trade relations with China in the eastern half of Europe are expanding. This development could stimulate a more even distribution of economic activity, and of trade relations with China, across Europe.”

These lands include Poland, whose Deputy Minister of Infrastructure and Construction, Justyna Skrzydło, expressed her country’s commitment at the Belt and Road Summit 2017 in Hong Kong.

“We believe the framework offers opportunities for sustainable, balanced and profitable development,” says Skrzydło, who is upbeat on the prospects of developing trade on a new Silk Road.

“Just as Hong Kong is the gateway to the Chinese mainland, Poland is on the route between Asia and the West and constitutes a geographical strategic gateway to the rest of Europe.”

Likewise for other countries not thought of as Silk Road destinations. According to Confederation of Danish Industry, China moved from being Denmark’s 19th largest export market in 2000 to the seventh largest export destination in 2016.

“The ‘Belt and Road Initiative’ gives huge opportunities for Chinese companies to go out,” says van Scheltinga. “There is more and more outbound investment going to the ‘Belt and Road’ countries, and these companies are going which way the wind blows.

“I can’t think of a down side for European companies, people say political influence but this is really just a trade thing.”

Overall, there remains a great deal of scepticism within the Hong Kong community, something that government officials are trying to dispel.

“People running small businesses in Hong Kong might be inclined to say what has the ‘Belt and Road Initiative’ got to do with me?” Secretary for Commerce and Economic Development Edward Yau Tang-wah told the Belt and Road Summit 2017.

“Hong Kong has multinationals and small businesses, but the important thing is that Hong Kong also has talent in flexibility, ingenuity, knowledge, professional capabilities and experience, and that makes the difference.”